Oil markets to remain oversupplied in 2025 despite OPEC+ cuts, warns IEA

Oil markets are expected to remain oversupplied next year despite OPEC+ production cuts, the International Energy Agency (IEA) said on Thursday. 

“Persistent overproduction from some OPEC+ members, robust supply growth from non-OPEC+ countries and relatively modest global oil demand growth leaves the market looking comfortably supplied in 2025,” the agency said in its December Oil Market Report. 

The Organization of the Petroleum Exporting Countries and allies extended its steep voluntary production cuts of 2.2 million barrels per day by three months till the end of March. 

The cartel was scheduled to unwind some of these cuts and increase output from January. 

The Paris-based energy watchdog said:

Supply overhang

The IEA said after the OPEC+ extended its production cuts, the supply overhang for next year has materially reduced. 

However, in the absence of stronger demand growth, IEA still sees the oil market oversupplied by 950,000 barrels per day next year. 

“If OPEC+ does begin unwinding the voluntary cuts from the end of March 2025, this overhang would rise to 1.4 mb/d,” it further said. 

The agency also said that overproduction from OPEC+ was at 680,000 barrels per day during November. 

OPEC+ crude oil production may still rise next year if Libya, South Sudan and Sudan can sustain production and as Kazakhstan’s 260,000 barrels per day Tengiz expansion comes online, the agency said in the report. 

Rising non-OPEC supply

IEA believes the bulk of supply growth will be dominated by the non-OPEC countries in 2025. 

Supply growth of both crude oil and natural gas liquids from countries such as the US, Brazil, Guyana, Canada and Argentina will be more than 1.1 million barrels per day in 2025. 

In November, global oil supply rose by 130,000 barrels per day to 103.4 million barrels per day, according to the report.

The growth was 230,000 barrels per day more than the same period last year. 

The rise in supply was due to recovery in Libya and Kazakhstan's output. 

The IEA said total oil supply is on track to increase by 630,000 barrels a day this year and 1.9 million barrels per day in 2025, to 104.8 million barrels a day, even in the absence of unwinding of OPEC+ cuts. 

Demand growth

"While the market is closely assessing ongoing geopolitical tensions and evolving OPEC+ supply dynamics, the bigger question for 2025 remains global oil demand," IEA noted.  

The slowing down of oil demand growth has been attributed to an abrupt halt in China’s oil consumption this year.

Also, lower demand in emerging countries such as Nigeria, Pakistan, Indonesia, South Africa and Argentina has weighed on the outlook. 

The subdued demand growth is likely to continue next year.

Demand is expected to rise by 1.1 million barrels per day next year from just 840,000 barrels per day in 2024, the agency said. 

“As the year draws to a close, oil markets appear relatively calm, with crude oil trading in a $70-75/bbl range,” it said.